IfG.CC - The Potsdam eGovernment Competence Center

As we enter the early stages the era of the Internet of Things (IoT), or what has now been coined as the ‘Fourth Industrial Revolution’, it is now more imperative for governments of major economic countries and businesses to catch up or risk falling behind this new evolution sweeping through global markets.
The population is shifting, the young generation of tech-savvy Millennials are rapidly moving into their prime spending years.

Governments and businesses now have to re-examine the way they run their economies and businesses to meet the demand of this new breed of consumers and the incoming digitally-apt generations.

According to a report by Goldman Sachs, the Millennials, or Generation Y, is one of the largest generations in history. It pointed out that Millennials have come of age during a time of technological change, globalisation and economic disruption and their impact on the economy will be huge.

Already, governments in major economic countries and conglomerates worldwide are recognising this change by implementing digital tools into their every day operations to meet this new demand.

From simple marketing and advertising on online social medias, to running day-to-day business matters on a fully digitalised system, this fast-moving digital landscape is now the new norm for today’s economy.

In Southeast Asia, according to a report by Google and Temasek Singapore, the digital economy in Southeast Asia is expected to increase 6.5-folds over the next decade, to reach US$200 billion.

The report also pointed out that Southeast Asia is the world’s fastest growing internet region with an approximate 14 per cent five-year compound annual growth rate (CAGR) and this internet population is expected to reach circa 480 million users by 2020, making it fundamental for countries such as Malaysia to tap in to this rich resource.

In Malaysia – while there are still no clear indication of where Malaysia stands in terms of its digital economy against its neighbouring countries in Southeast Asia – the digital growth in the country has been steady but some have viewed it as slow, compared with other leading nations in the region.

According to a Ernst & Young’s (EY) report titled ‘Decoding the Malaysian digital DNA: From smart to savvy’, more than half of Malaysians believe that the country’s digital economy is a work-in-progress as 57 per cent believe Malaysia’s digital economy is ‘less advanced’ than leading nations, 53 per cent are dissatisfied with internet speed, while 51 per cent think the cost of accessing data – whether through fixed or mobile internet or while roaming – is unreasonable.

Nevertheless, EY pointed out in the August 2016 report that Malaysians have kept pace with digital device adoption, with smartphone usage at 91 per cent and daily internet usage at 87 per cent.

Nevertheless, more still needs to be done for Malaysia to improve itself as a digital nation. With the 2020, high-income nation dateline just three years away, and the growing digitally-savvy population taking centre stage in the nation’s economic growth, Malaysia is ramping up its efforts to improve its digital infrastructure and economy. Last year, during the announcement for Malaysia’s Budget 2017, Prime Minister Datuk Seri Najib Tun Razak revealed a slew of initiatives aimed at boosting the digital economy and the digital adoption across various sectors of the economy.

The budget initiatives related to the digital economy includes a commitment to improve the speed of fixed line broadband services with a RM1 billion allocation to the Malaysian Communications and Multimedia Commission (MCMC) to ensure quality coverage and speed of up to a baseline of 20MB per second.

The Budget 2017 measures also builds on various digital inclusivity including the eRezeki, and eUsahawan programme, to improve the human capital in Malaysia.

Aside from that, Najib had also announced that executive chairman of Alibaba Group and internet tycoon Jack Ma has been appointed as the government’s digital economy adviser to help execute measures that could further lift Malaysia’s status in on global digital stage.

Pertinent to that note, Budget 2017 also introduced initiatives to develop more digital hubs in Malaysia including the world’s first Digital Free Trade Zone (DFTZ); a microcosm to support internet companies to trade goods, provide services, innovate and co-create solutions.

“Malaysians have embraced the internet economy and eCommerce in a big way. We are now leading the eCommerce market in the region generating revenue of US$2.3billion in 2015. With the launch of the world’s first Digital Free Trade Zone, Malaysia will serve as a regional eFulfillment center, and also become the regional hub for SMEs, marketplaces and monobrands,” said Najib during the launch of DFTZ last month.

“If we want double-digit growth, I believe the only sector that can bring us towards that direction is the digital sector.

“We must push hard and must make a success of Digital Malaysia,” he said at the National Transformation 2050 (TN50) Townhall Dialogue held recently.

On par with the nation’s race on the digital grid, Sarawak’s government is also looking to push the digital adoption across the state.

BizHive Weekly takes a look at the progress in the state.

Investing on infrastructures

ICT infrastructures – the foundations of the digital world. Yet, with financial, social, and even geographical matters at hand, setting up enough ICT infrastructures to meet the demand is one of the key factors that Sarawak has to face and solve in order to move further up on the digital ranks.

As at the third quarter of 2016, Sarawak’s broadband reach is at 51.8 per cent, based on statistics by Malaysian Communications and Multimedia Commission (MCMC).

With Sarawak’s large landmass, scattered population and rough terrains, it has been challenging to install telecommunications infrastructures that could reach the sub-urban and rural districts in Sarawak, yet still be commercially viable for companies involved in the installation and maintenance of these infrastructures.

According to reports by Bernama, the government has so far provided 90,642 port connections for high speed broadband (HSBB) projects involving 13 exchanges in Sarawak

It quoted the Communications and Multimedia Ministry as saying that 9,188 port connections for broadband with speed up to 100Mbps were still in the implementation stage and is expected to be completed in the fourth quarter of this year.

It also noted that the sub-urban broadband (SUBB) and rural broadband (RBB) projects would provide speeds of up to 20Mbps in sub-urban and rural areas.

On the state government’s level, Sarawak’s government also realises the importance of laying down the foundations of the digital economy by allocating RM1 billion to upgrade ICT infrastructures across the state, with the objective of increasing the connectivity speed. He also aims for Sarawak to have 5,000 telecommunications towers across the state, a huge jump from the current circa 1,200 towers.

Furthermore, Chief Minister Abang Johari had stressed the importance of high speed connectivity and he wants Sarawak to have a high speed internet highway of two terabits per second.

Sarawak Socio-Economic Transformation Plan (SETP) 2016 to 2030, which included the three areas of socio-economic transformation; rural transformation and performance as well as service and delivery transformation, also has a target of 95 per cent broadband coverage in populated areas by 2020 and subsequently 100 per cent by 2030, with a minimum throughout of 30Mbps.

Sharing his view ‘Challenges and future perspective on the next generation internet infrastructure’ during the recently held IDECS 2017, Sacofa managing director Zaid Zaini said he is confident that the state could achieve Abang Johari’s vision of high-speed connectivity.

He believed that with both state and federal government initiatives and plans in enhancing internet infrastructure, it would be possible to achieve the high speed which Abang Johari has envisioned.

With great data speed comes the huge influx of data exchange. In this case, Zaid pointed out that data infrastructures are also in the planning, with another data centre set to be developed within the Bandar Samariang centre.

Incorporating natural elements such as the usage of water from the river to keep the systems cool, the upcoming data centre would be the first floating data centre in the region.

Sarawak riding the digital wave

Exciting changes are happening in Sarawak as forward-thinking Chief Minister Datuk Amar Abang Johari Tun Openg plans to transform the state into a cyber powerhouse, capable of producing high-income, innovative talents and products that could overall, boost the socio-economy of the state.

Since coming into office early this year, Abang Johari has taken various strategic steps to start the initial phases of moving Sarawak’s digital economy forward as part of the state government’s economic development strategy.

These initiatives have been viewed by many as a bold and exciting move by the new Chief Minister as the government is not only embracing the digital change but also leveraging on the myriad of opportunities a borderless ‘e-conomy’ could offer.

“The digital economy will create an entirely new dimension of development and growth for Sarawak. The digital economy will create new jobs for the young people in urban centres and rural areas, transforming the way we live and do business.

“The digital economy will challenge the traditional models of doing business in Sarawak and allow young new entrepreneurs and business people to move forward to the front.

“The Sarawak government realises its importance and is therefore fully committed to developing the digital economy,” said Abang Johari during the launch of the International ICT Infrastructure and Digital Economy Conference Sarawak (IDECS) 2017 last week.

Following the event, he also announced nine key resolutions to transform Sarawak’s digital economy.

These resolutions include the establishment of Sarawak’s very own Development Bank of Sarawak (DBOS) to financially support high impact projects in line with the state’s effort to promote social economic transformation catch-up plan (2017-2030), and the establishment of Sarawak Multimedia Authority to regulate the development of ICT infrastructure and digital technology utilisation.

The state government also aims at establishing Sarawak Digital Economy Corporation to coordinate and manage properly all digital economy initiatives focusing in key areas namely infrastructure, e-government, talent development, e-commerce, and cyber security.

Youths, entrepreneurs central to push digital plan

At the heart of Sarawak’s digital drive is the need to cultivate human capital. A properly equipped human capital also plays a vital role in the whole digital economy eco-system Sarawak wishes to achieve.

“There is a need to build talent. There is global war in digital talents right now. Every new technology area, there’s a skill gap that needs to be filled. Sarawak needs to align with where those gap skills are lying.

“The education system plays a big role in that. Youths play the most important role in driving this development. Sarawak needs to ensure that they have the right skills to establish themselves in the digital economy and that they are fit for purpose for the jobs,” said International Data Corporation (IDC) Europe chief analyst Phillip Carter.

He shared this during his talk on ‘The dawn of the digital econnomy: Emerging best practices from a global perspective’ at IDECS 2017.

Youths in Sarawak will take on a major role in the economy as they comprise of approximately a quarter (20 per cent) of Sarawak’s population. In the next five years or so, the job market will be filled with this new generation of skilled labour.

In Sarawak, the education system is still in its early stages of producing youths, trained and equipped with hard and soft skills the digital economy requires.

Nevertheless, Sarawak has a well established ICT-based education institutions such as Swinburne University of Technology, Curtin University of Technology, University Teknologi Mara, and more. These universities are prepared to train and further sharpen youths’ skills in the ICT industry.

Harnessing local talents

To further harness the talents in Sarawak, Abang Johari had also announced that the E-Com Y30 and the Digital Village, which will provide young entrepreneurs an avenue to unleash their creativity and innovate to create something new.

The E-Com Y30 is a youth transformation plan set to extend until 2030 and it will begin with the establishment of the young entrepreneurs’ tech incubator; the Digital Village.

The Digital Village, is expected to be built in Samajaya, and it can be strengthened to provide a Silicon-Valley-type infrastructure to drive digital-minded Sarawakians to producing new disruptive business models.

“We must ensure that the economy of the state is in tandem with the global changes.

“If we have more Sarawakians who can think in this innovative way, we can start new technologies, new businesses. I want Sarawak to produce more entrepreneurs that are innovative, who can market our own products because we are rich with natural resources.

“My vision is for young Sarawak entrepreneurs to possess good education and have that creative mind to create something out of our own assets,” said Abang Johari.

Challenges in cyberspace

Moving into the digital economy, like every other industry and markets, challenges lie ahead. Some of the major problems that a nation might face when expanding the digital economy across its economic platform include regulation, cyber privacy and security, overwhelming amount exchange of data, budget constraints, digital divide among citizens, and more.

Deloitte in a report on ‘Digital government transformation’ pointed out that the government constantly deals with highly sensitive information while budget constraints can block governments from investing in the right digital solutions.

It recommended that governments should take a thorough assessment of its privacy and security, as well as instigate a risk management approach which accounts for vulnerability.

It also pointed out that a strategic budget and investments from third parties or the private sector could offset the costs that might incur to digitalise a nation.

Aside from that, it also highlighted the possibility of people displaced by digitisation to new roles. It suggested that governments should train their employees and equip them with skills to make them relevant in this transitioning stage.

Besides that, it noted that although digital accessibility has improved over recent years, governments have an obligation to be accessible to citizens and so minimising digital exclusion is critical.

It pointed out that governments should try to reduce the digital divide which might involve: improving the level of digital skills for certain groups and reducing the difficulty of using digital services, by improving user experiences.

Now, the more important question is, are Malaysians ready for a digitalised economy?

According to EY, given Malaysia’s diversified, vibrant economy and youthful population, organisations that get their digital operating models right will have significant opportunities.

“We see a strong upside in businesses undertaking digital transformation projects and participating in government delivery of more efficient and affordable digital infrastructure,” it said in its ‘Decoding the Malaysian digital DNA: From smart to savvy’ report.

“Consumers are demanding a safe, secure and seamless end-to-end experience supported by a more efficient and affordable digital infrastructure.

“With Malaysia’s diverse economy and young population, this presents vast opportunities for government agencies and businesses to rise to the challenge and collaborate on smart transformations that will deliver high-quality digital experiences to the consumers.

“Initiatives recently announced in Malaysia’s Budget 2017 to upgrade the speed of Malaysia’s broadband infrastructure at cost-competitive prices, as well as to establish the Malaysian Digital Hub and Digital Free Zones, are all steps in the right direction.”

As for Sarawak, are we ready to take on the challenge of being a cyber powerhouse? According to Australian Computer Society president Anthony Wong, we are already on the right track.

“We need talent and educational institutions. From my perspective, the talent is here because the educational institutions and facilities are already here.

“These two pillars are already holding up the eco-system here. But to sustain that eco-system, there needs to be more,” he said.

Wong, who is himself a Sarawakian, added, “For Sarawak, the major ingredients are here but it needs to focus on its priorities. Sarawak needs the infrastructure.

“As a state with a small population, it needs to connect with markets across the region and the world.

“Sarawak also has the leadership to move this digital change. Based on the efforts the Chief Minister has announced, Sarawak is already on the right track.

“The next thing Sarawak needs to look at is to train its employees and the people involved in all these digitisation projects. They need to know more about the digital economy, the technologies out there, and more.”